The Federal Bureau of Investigation (FBI) is investigating the pricing practices of American Express’s foreign exchange international payments department. Citing people familiar with the matter, The Wall Street Journal (WSJ) reported that the investigation is looking into whether the department misled clients about pricing to win over their business.
The probe started last month after it was revealed that Amex’s foreign exchange unit had lured business clients by offering them low rates to convert currency, only to quietly raise the prices.
Sources told WSJ that American Express engaged in the practice for more than a decade, with the department regularly increasing conversion rates without alerting customers in an effort to boost revenue and the commissions that employees in the unit received. The employees went after small and mid-sized businesses (SMBs), a group that represents around one-quarter of American Express’ credit card revenue.
The report added that when clients did complain, the unit would blame technical issues and lower the cost. Employees were also told by managers to keep the details of the payment arrangement “hazy” when talking to would-be customers so they wouldn’t be locked into terms. American Express said at the time that it doesn’t have pricing contracts in place for the lion’s share of its foreign exchange customers.
“We have training, control and compliance oversight, and believe that our transactions are completed and reported in a fair and transparent manner at the rates which the client has authorized,” said spokeswoman Marina Norville. “We constantly reinforce the importance of acting in the best interest of our customers.”
The FBI isn’t the only agency looking into the allegations: The Office of the Comptroller of the Currency (OCC) is also investigating how Amex disclosed pricing to customers.
Amex declined to comment about both probes, but news of the investigations sent the company’s shares down 1.2 percent on Wednesday (Sept. 5).